Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

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<a href="https://www.smartkarma.com/entities/mount-gibson-iron-ltd" target="_blank" data-smartkarma-citation="entities:19043:1" rel="noopener">Mount Gibson Iron (MGX AU)</a> reported a disappointing Q4 FY24 production report. Volumes were inline, but provisional pricing impacts of ~20% brought a quarterly cash outflow of one mn AUD.</li>
<li>Volume guidance for FY25 was light at 2.7-3 mn tons (vs. 4.1 mn in FY24). Net Cash rose to 436 mn AUD (excluding Fenix Investment), almost equaling the market cap. </li>
<li>FY24 results are due on 21st August 2024, when the board will recommend a dividend. Net cash and future cash flows should support the share price in the long run.  </li>
</ul>



Mount Gibson Iron (MGX AU) reported a disappointing Q4 FY24 production report. Volumes were inline, but provisional pricing impacts of ~20% brought a quarterly cash outflow of one mn AUD.
Volume guidance for FY25 was light at 2.7-3 mn tons (vs. 4.1 mn in FY24). Net Cash rose to 436 mn AUD (excluding Fenix Investment), almost equaling the market cap. 
FY24 results are due on 21st August 2024, when the board will recommend a dividend. Net cash and future cash flows should support the share price in the long run.  


Mount Gibson (MGX AU): Q4 Production Report And Guidance Disappointing, But Mkt Cap = Net Cash

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<li>Iron ore continued to operate in its band from 95-130 USD/ton over the last few years, with a recent drop from 120 USD/ton to 105 USD/ton on tepid China data.</li>
<li>With incremental news on China's stimulus in the property and infrastructure sectors, we remain confident that iron ore will return to 120 USD/ton in the short term. </li>
<li>We also remain bullish on the 65-62 spread, which has expanded to the teens. <a href="https://www.smartkarma.com/entities/rio-tinto-ltd" target="_blank" data-smartkarma-citation="entities:13:1" rel="noopener">Rio Tinto Ltd (RIO AU)</a> and <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a>  are good plays on the spread.</li>
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Iron ore continued to operate in its band from 95-130 USD/ton over the last few years, with a recent drop from 120 USD/ton to 105 USD/ton on tepid China data.
With incremental news on China's stimulus in the property and infrastructure sectors, we remain confident that iron ore will return to 120 USD/ton in the short term. 
We also remain bullish on the 65-62 spread, which has expanded to the teens. Rio Tinto Ltd (RIO AU) and Vale (VALE US)  are good plays on the spread.


Iron Ore: Disappointing Data Pushed Price Down to 105, Bounce To 120 On Further Stimulus From China

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<li>
<a href="https://www.smartkarma.com/entities/mount-gibson-iron-ltd" target="_blank" data-smartkarma-citation="entities:19043:1" rel="noopener">Mount Gibson Iron (MGX AU)</a> is a pure play on iron ore trading at 0.5x EV-EBITDA, with 77% of the market capitalization in cash in H1 FY24 (likely to grow).</li>
<li>The company is about to announce reinstating its dividend, and a 50% payout could result in a yield of 20% on the current share price. </li>
<li>The company's main catalyst is its earnings release in August, after which a board meeting will decide on future dividends (which it has already committed to shareholders). </li>
</ul>



Mount Gibson Iron (MGX AU) is a pure play on iron ore trading at 0.5x EV-EBITDA, with 77% of the market capitalization in cash in H1 FY24 (likely to grow).
The company is about to announce reinstating its dividend, and a 50% payout could result in a yield of 20% on the current share price. 
The company's main catalyst is its earnings release in August, after which a board meeting will decide on future dividends (which it has already committed to shareholders). 


Mount Gibson (MGX AU): Iron Ore Pure Play, 77% of the Mkt Cap in Cash, 0.5x EV-EBITDA With Catalysts

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<li>Chinese steel production was -2.8% YoY, significantly better than the -10.3% YoY in December. The replacement of Iranian steel exports and, to a larger extent, better demand have catalyzed this. </li>
<li>The 65-62 spread widened to 20 USD/ton, above the normalized average, as China's demand for high-grade ore improved and mills showed higher profitability.  </li>
<li>With a 5-10 USD/ton in the cost curve and disappointing shipments from Simandou, we see iron ore remain rangebound between 95-110 USD/ton.</li>
</ul>


Chinese steel production was -2.8% YoY, significantly better than the -10.3% YoY in December. The replacement of Iranian steel exports and, to a larger extent, better demand have catalyzed this. 
The 65-62 spread widened to 20 USD/ton, above the normalized average, as China's demand for high-grade ore improved and mills showed higher profitability.  
With a 5-10 USD/ton in the cost curve and disappointing shipments from Simandou, we see iron ore remain rangebound between 95-110 USD/ton.


Cost Push, Higher Chinese Utilizations Support Iron Ore At > USD 100/Ton

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<a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">Fortescue Metals (FMG AU)</a> and <a href="https://www.smartkarma.com/entities/fenix-resources-ltd" target="_blank" data-smartkarma-citation="entities:7405:1" rel="noopener">Fenix Resources (FEX AU)</a> reported their Q3 operational results last week, highlighting strong numbers despite challenging conditions due to <a href="https://content.fortescue.com/fortescue17114-fortescueeb60-productionbbdb-8be5/media/project/fortescueportal/shared/documents/regulatory/transcripts/march-2026-quarterly-production-report---investor-and-analyst-call-transcript.pdf" target="_blank" rel="noopener">Hurricane "Norelle" </a>and <a href="https://wcsecure.weblink.com.au/pdf/FEX/03081593.pdf" target="_blank" rel="noopener">diesel price increases</a>. </li>
<li>With 30 days of diesel available in Australia, companies are focusing on procurement and storage strategies (short-term), as well as on diesel substitution through EV haulage in the future (long-term).  </li>
<li>More than a third of the questions asked in the conference calls related to diesel price/ availability, and to a pivot toward future strategies that could minimize diesel usage. </li>
</ul>



Fortescue Metals (FMG AU) and Fenix Resources (FEX AU) reported their Q3 operational results last week, highlighting strong numbers despite challenging conditions due to Hurricane "Norelle" and diesel price increases. 
With 30 days of diesel available in Australia, companies are focusing on procurement and storage strategies (short-term), as well as on diesel substitution through EV haulage in the future (long-term).  
More than a third of the questions asked in the conference calls related to diesel price/ availability, and to a pivot toward future strategies that could minimize diesel usage. 


Iron Ore Q3FY26 Operational Reports: Are The Miners Going To Find Diesel Supply/Price Challenging?

Australia

Fenix Resources Ltd operates as a resource exploration company. The Company explores for iron ore, vanadium, and manganese. Fenix Resources develops its projects in Australia.

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Fenix Resources (FEX AU)

Mount Gibson (MGX AU): Q4 Production Report And Guidance Disappointing, But Mkt Cap = Net Cash

We summarise Mount Gibson's Q4FY24 production report. Net cash and Investments are now equal to market capitalization, which means the market...

Sameer Taneja

Iron Ore: Disappointing Data Pushed Price Down to 105, Bounce To 120 On Further Stimulus From China

We provide our take on the China data like TSF, auto sales and property that led to the sell-off in iron ore. We provide our rationale for an iron...

Sameer Taneja

Mount Gibson (MGX AU): Iron Ore Pure Play, 77% of the Mkt Cap in Cash, 0.5x EV-EBITDA With Catalysts

Mount Gibson Iron (MGX AU) is a pure play on iron ore trading at 0.5x EV-EBITDA, with 77% of the market capitalization in cash. We look forward to...

Sameer Taneja

Cost Push, Higher Chinese Utilizations Support Iron Ore At > USD 100/Ton

Iron ore prices retraced to 106 USD/ton, but we continue to believe it will remain rangebound (95-110 USD/ton) due to cost pressures, the Simandou...

Sameer Taneja

Iron Ore Q3FY26 Operational Reports: Are The Miners Going To Find Diesel Supply/Price Challenging?

We summarize the operational calls by FMG and Fenix Resources following their Q3FY26 releases. Common themes are cost-push due to the diesel price...

Sameer Taneja

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